7 Useful Investing Tips: Is Investing in Stocks Mandatory?7 min read
Sooner or later in our life, either we tend to have enough money reserved in our banks or feel like earning long-term interest in a company as a shareholder. I think no one would disagree with me on investing their money to earn more, rather than keeping it idle. That’s when the idea of the stock market comes in. Just imagine!
How complicated would it be to purchase a share or sell it without a stock market? During that time, people would have to transact directly with the company needing their banker and attorney. Even without a robust stock market, you would have to look for buyers to sell your shares. That would undoubtedly become a huge hassle.
What are Stocks and Why Do People Buy Stocks?
The stock market usually refers to the collection of markets and exchanges where regular activities of procurement, vending, and issuance of shares of publicly-held companies take place. In turn, those companies gain access to large amounts of capital that they can use to improve and grow their business.
There are many other reasons behind buying stocks other than growing your business. If you are new in this arena or thinking of getting back into stock dealings, then let me state some of the pragmatic reasons behind buying stocks.
Don’t Let Your Money Stay Under Your Mattress to Lose its Magical Power to Buy You Anything!
The heading might sound terrific but, that’s the harsh reality of this world. If you save $1000 thinking of buying the most luxurious chandelier for your house after 30 years, then you will find yourself buying nothing other than a minimal range of ceiling lights, as our money loses its value over time.
Probably, you might have heard of inflation. I won’t go deep into this matter, but primarily, inflation means the rising cost of consumer goods and services that ultimately leads to loss of the original value of money over time. You will badly realize this scenario when your grandparents recall saying they have spent only a few ten to twenty bucks for watching movies while holding large-sized popcorns 50 years back. Indeed!
You can set aside your hard-earned cash in a Certificate of Deposit (CD) rather than buying stocks, but that is not just sufficient enough to avoid reckless inflation. So, it is consistently insightful to invest in stocks to stay ahead of the inflation monster.
Easy to Invest Without Any Lengthy Procedures
There are infinite routes to invest in, such as buying real estate, start a small business, buy bonds, or even invest in a mutual fund, and much more. But the extraordinary part about investing in stocks is that it’s relatively easy to handle than any other contractual investments.
To buy stocks all you need to do is sign up over online with the trading brokers in E*Trade, Fidelity, or Interactive Brokers, etc. Buying or selling stocks is just a few clicks away, but definitely, you cannot just take such a huge decision without any prior research.
For example, if you purchased a stock one fine Monday afternoon worth $100,000 and you want the cash out right away on Tuesday, you could easily do that with just a few clicks. Whereas, an illiquid asset like the real estate, might take a long time to process that invested money into cash. Hence, it is always convenient to invest in stocks to earn more in a facile way.
Save for Your Retirement
From my personal experience and the surrounding, I have often heard of investing at a young age to build an incredible amount of capital when you grow old. Investing sensibly in stocks might let you afford a nice big nest egg to live off as a rainy-day fund even during your retirement.
Few Important Things You Should Be Aware of Before Investing in Stocks
Unfortunately, many companies are under the inevitable influence of market issues such as changes in production technology, fluctuating price of resources, and the shifting costs of labor and many more. And of course, plenty of investors are simply ready to sell valuable stocks and pursue their personal interests.
All these variables cause the day to day noise in the market, which can make companies appear more or less successful. And in the stock market, appearing to lose value often leads to losing investors. And in turn, losing the actual value!
In this highly predictable system, we need to figure out when to invest and where to invest our valuable money.
Nothing is a Grand Slam!
Many people might think investing in stock brings about long-term financial security. Moreover, the stock market has a historical background of its growth by 7% per year. But, know that the stock market is volatile! Hence, it comes with substantial risk even after a long period of return investment. Be cautious! While investing in the stock market, research, understand and then decide.
Expand Your Investments
Investing your hard-earned cash as a shareholder in several companies can be the most common and strategical way to reduce the risk of investing in stocks. Even if any company’s stock plunges, your other investments will protect you in that case. Because you never can guarantee which company will bring you success overnight or which will bring your down. So, investing in one promising company is always a risk.
Let the Machine Predict it for you!
You don’t have to sit in front of the TV for hours to predict the upcoming stock prices. You can do that easily with the help of applications such as Robinhood, Charles Schwab, etc. that can forecast and analyze the stock prices for your easy decision making. This also cuts off the brokerage fee that the investors face offline while buying stocks.
To know in detail as to why investing in the stocks is useful in building wealth, you can go through these following two books:
- Stock Market Investing for Beginners: Essentials to Start Investing Successfully
- Invest Like Warren Buffett: Powerful Strategies for Building Wealth
Why We Recommend These Books
This book portrays a decent foundation for an investor who is embarking to wander in the stock market as a beginner. It informs you in simple and plain English regarding the basics of stock market and venture methodologies to strengthen your investing proficiency. In case you’re searching for a word of wisdom on which stock to purchase and when to sell it, you can discover it in this book
The author, Mathew R. Kratter has mentioned a proven strategy of Warren Buffet that will help you learn a lot more about growing your money through stocks in a phased manner. Starting from figuring out how much to pay for high-quality stock to know the best time for buying stock, and much more.
Investing in stocks or anything else is a huge decision. Well! It sounds pretty financial when it comes to investing in stocks, but if you are planning to grow your savings over an extended period of time, then buying stock is a good option for you. You don’t have to bother about how much you want to invest because of the growth of online apps like Robinhood. Those apps have made it easier for investors to dabble in investing with petty cash. Go through these two books mentioned above. I hope so, that will help you dive deeper into the world of investing in stocks.